TrackInsight: Global equities hit again by bearish pressure

U.S. stock markets tumbled at the beginning of the week as investors moved away from high-flying tech stocks after Apple supplier Lumentum fell more than 30% on fresh signs of weak iPhone demand.

Risk aversion was also fuelled by a slump in financials, mostly banks, led by Goldman Sachs as Malaysia reportedly was seeking a full refund of all the fees it paid to the bank for arranging billions of dollars of deals for the sovereign wealth fund ‘1MDB’.

Energy names were also shunned as oil prices continued their downward spiral following an umpteenth tweet from President Trump criticizing Saudi Arabia’s plan to cut oil production and insisting that oil prices should be much lower. U.S. West Texas Intermediate (WTI) crude futures dived more than 7 percent over the week (the sixth straight week in the red with a cumulative loss of 23 percent!).

The oil plunge also underlines cracks in the global economy. As an illustration, the third-quarter growth data showed that the German GDP had shrunk by 0.2 percent (the first time it has contracted since Q1 2015) pushing the DAX index downward (-1.63 percent WTD compared with -1.52 percent for the MSCI World index in US$ and -0.68 percent for the S&P500).

The bearish trend in Europe was also strenghtened by the rash of resignations which rocked Prime Minister Theresa May’s government and threw into doubt her long-awaited Brexit agreement just a few hours after it was unveiled. The FTSE100 index fell by 1.29 percent over the week while the British pound suffered a loss of 1.86 percent against the euro.

On the interest rate front, the 10-Year US and German Treasury yields fell by 12bps and 4bps respectively. By contrast, high yield bonds were sold on both sides of the Atlantic as credit risk appetite vanished.